Moise Vuillaume at Skillfinder

Why is Luxembourg a FinTech hub?

Luxembourg specialises in the cross-border fund administration business. Over 38% of all cross-border collateral has been pledged to the Eurosystem via Clearstream Banking, Bank Central du Luxembourg & Globe Settle.The Association of the Luxembourg Fund Industry (ALFI) is an association who is the representative body of the Luxembourg investment fund community. Created in 1988, the Association today represents over 1,300 Luxembourg domiciled investment funds, asset management companies and a wide range of service providers such as depository banks, fund administrators and transfer agentsThe Luxembourg Fund industry is the largest fund domicile in Europe and a worldwide leader in the cross-border distribution of funds. Luxembourg-domiciled investment structures are distributed on a global basis in more than 70 countries with a particular focus on Europe, Asia, Latin America and the Middle East.Back in 2010, Luxembourg’s central Bank, La Banque Centrale Du Luxembourg, and Clearstream launched LuxCSD, a new central securities depository service for Luxembourg and beyond.What is a CSD?CSD stands for “Central Securities Depository”. A CSD is an entity which provides a central point for depositing financial instruments i.e. securities. CSDs’ clients are typically financial institutions themselves e.g. investment banks, Insurance companies etc.Although CSDs worldwide differ in their daily operations, according to the EU Regulation of 2014 the core functions performed by a CSD are:1. Operates a securities settlement system (settlement service).2. Records newly issued securities in a book-entry system (notary service).3. Provides and maintains securities accounts at the top tier level (central maintenance service). Clearstream is a key stakeholder in the securities services industry benefiting from consistently high credit ratings.As an international central securities depository based in Luxembourg, they provide post-trade infrastructure and securities services for the international market.LuxCSD allows for settlement of securities transactions in central bank money reducing the risk for financial market participants. Furthermore, it provides an issuing and central settlement and custody services for securities of all types.3 “LuxCSD is a CSD in the new mould. It will offer custodians and distributors across Europe excellent custody and added value services built on top of a highly efficient settlement process with access to a large range of counter-parties. We believe that LuxCSD will form a core element of Luxembourg’s proposition for years to come”. - Jeffrey Tessler, CEO of ClearstreamWhere will the European financial hub be in 5 years?It’s still very hard to tell.With an ever-changing market due to recent political turmoil, there is no guarantee as to where the new “financial hot spot” will be.However, the latest from Brussels and the UK government street suggests a potential partial “exodus” of the financial industry from London to the EU with the hottest locations being Frankfurt, Paris, Dublin & Luxembourg, with Luxembourg already being home to 60,000 financial jobs.Tokio Marine recently announced it was applying for regulatory approval to set up operations in Luxembourg, making it the ninth insurer to choose the Grand Duchy.Perhaps Luxembourg will not become the financial centre of the world given its limited infrastructure to support expansion, but it’s a pretty safe bet that it will play a key part in it.With an established presence in Luxembourg, Skillfinder International has seen an opportunity to support the local market better. Existing and potential new customers often prefer suppliers to demonstrate compliance by operating from a local office and so in 2016 we opened SKILLFINDER S.A.R.L. in the Grand Duchy.Contact Our Luxembourg teamLUX: + 352 (0)20 21 15 15UK: +44 (0)203 763 9500E: info@skillfindergroup.com

MiFID II

MiFID II: What is it and why should you care?Why you should care is quite simple; MiFID II was enforced by law on Jan 2018 to all member states of the European Union.What is it? This is a bit less simple. MIFID stands for Markets in Financial Instruments Directive (II) and in short it is a single regulatory codex created by the European Union to control its financial markets and third country access to its investors.It affects a wide range of industries and companies but it will be particularly essential for firms that provide services to clients linked to “financial instruments” i.e. shares, bonds, derivatives etc...It was thought up by the G20 Pittsburgh trading committee as a response to the 2007 Credit Crunch. Its main enforcer is the European Banking Authority (EBA).According to Richard Bentley, CPO at Ullink financial services, MiFID II comes also with its own baggage of I.T. implementation. For the most part, Project Managers and Business Analysts will have to focus on Data i.e. when it needs to be reported, how and from what systems.Another big impact is that of DMAs (Direct Market Access) – the software that connects internal trading systems to the venues. MiFID II will require changes to the electronic messages sent and received by participants including:· Updates to timestamp granularity to support microseconds· New message fields computed by the order management system (OMS)· And complete new workflows for new market modelsWhy should UK firms adopt MiFID II regulations post Brexit?A simplified answer addressing this has been given by the FCA (Financial Conduct Authority): “[UK companies] are obligated to abide by UK law, including those derived by EU law and continue with implementation plans for legislation that is still to come into effect.”Although many lawmakers and authorities are looking to selectively “pick and choose” which aspects of MiFID II they wish to implement, this is not possible until 2019. Until then they will have to accept all aspects including:1. “Volume caps on dark pool trading, the ban on broker crossing networks, and the transparency regime for illiquid fixed income securities.” – K&K Global Consulting2. Organised trading of financial instruments Trade transparency of financial instruments is one of the most, if not the most, important changes brought by MiFID II. It entails making all Over the counter markets (OTC) trade public on a post trade basis.3. Investor Protection This is a direct response to the 2007 financial crisis; Investors will be given much more information regarding the costs of investment, potential risks and potential ROI.4. Market transparency Investment firms will have to start creating market making strategies using an algorithmic trading technique. All member states are obligated to place written agreements on regulated markets with all investment firms pursuing a market making strategy on them.According to buy-side consultancy K&KGC, the end of the UK’s relationship with Europe throws into question the longer-term arrangements of the UK with regard to MiFID II.However, one view is that UK firms will require that some kind of MiFID II “equivalency” reforms be put in place in order to continue doing business in Europe.info@skillfindergroup.comSources:1. https://spotlight.bloomberg.com/story/58945f1b3d03853f0ff6d6fe2. http://www.waterstechnology.com/buy-side-technology/news/2481665/60-percent-of-fund-managers-have-not-implemented-solutions-ahead-of-MiFID-ii3. https://www.linkedin.com/pulse/MiFID2-we-over-complicating-things-mark-cox?trk=v-feed&lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3BE4978%2F30CI1m%2FGAWe%2BV4gg%3D%3D4. http://flextrade.com/MiFID-ii-brexit-pain-points-hurdles/